My Turn: Budgets in Washington, D.C. and Juneau

Posted: March 26, 2013 - 12:06am

Congress has cut the annual federal deficit by 49 percent since 2009. Congress and the President have cut $4 trillion from the projected federal debt since Obama took office. Yet Alaska’s state operating and capital budgets have exploded over the same time period. And, we’ve stopped making payments into the state Budgetary Reserve. The biggest untold story of the last four years is that the federal government is making progress to reduce deficits and the debt while Alaska’s Governor and state Legislature has lost all sense of fiscal restraint.

The year President Obama took office, the federal deficit was 10 percent of GDP, an unsustainably high number. Meanwhile, the economy was hemorrhaging 700,000 jobs per month. Shrinking payrolls and falling economic output reduced revenue and made the deficit worse.

Since 2009, Congress and the President have made remarkable progress to reduce the annual deficit. This year, the deficit is 5.3 percent of GDP, a 49 percent reduction compared to when Obama took office. For the first time since the onset of the 2008 recession, our deficit has fallen to less than one trillion dollars. The non-partisan Congressional Budget Office estimates that the deficit will continue to decline to less than 3 percent. These haven’t been easy choices. Cuts to Defense programs, medical research, agriculture support, food stamps and much more have been made.

In contrast, Alaska’s state budget is approaching its own fiscal cliff. Since Governor Parnell and Lt Governor Treadwell took office in 2009, state operating expenses have grown some 20 percent, three times faster than the rate of population growth. The Governor has signed the largest capital budgets in Alaska history totaling several billion dollars. The year before Parnell and Treadwell took office, the Legislature and governor invested over $5 billion to pay down Alaska’s debt and save for the future. Last year in Fiscal Year 2013, the governor signed a budget with so much spending on the capital and operating budgets that the state actually withdrew money from the budgetary reserve. That’s like taking money out of our children’s piggy bank: Despite near-record revenues Parnell and the legislature spent more money than the state took in.

This year in the Legislature, the Parnell-Treadwell administration and the Republican majority are advocating for even more new spending: SB 21 and HB 4, bills to reduce oil revenue and obligate public money for an uneconomical gas pipeline. SB 21 would cost at least $1 billion per year and potentially much more. In fact, the Senate Resources Committee passed the bill without even knowing how much it will cost. HB 4 would set up a program to build a small-diameter natural gas pipeline to Speaker Chenault’s district on the Kenai Peninsula. Coincidentally, the gas line would benefit Chenault’s family’s oil and gas services business. What’s important for taxpayers is that the Chenault line would have ‘negative wellhead value.’ That means it would cost more money to produce the gas than would be recovered through selling it.

If a project is uneconomical, as HB 4 is, then the only option is for the state to finance it. Some call that “socialism,” but the speaker hasn’t referred to his bill that way. Whatever you call it, HB 4 would harm Alaska taxpayers in two ways: First, we would be on the hook for financing a gas line that can’t pay for itself. Second, consumers would be locked in to buying gas which costs more than it does now.

An analysis of the facts reveals that Alaska’s state budget has deteriorated while Congress and the President have started to get control of federal deficits. For the sake of Alaska taxpayers, we continue to need fiscal restraint at the state and federal level. Over the long term, government needs to balance revenue and spending. It is positive that our federal deficits are shrinking but we need to fix the problems brewing down in Juneau.